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Banking shares, mainly private sector lenders, were in focus on Tuesday the with Nifty Bank and Nifty Private Bank indices hitting their respective all-time high on the National Stock Exchange (NSE) on Tuesday.

Nifty Bank index hit high of 28,488 today, surpassing its previous high of 28,389 recorded on August 28, 2018 in intra-day deals. Nifty Private Bank, too, hit a record high of 16,292, surpassed its earlier high of 16,152 touched in August 2018. Both indices rallied over 2% each.

IndusInd Bank (up 5 per cent at Rs 1,585) and ICICI Bank (up 3.4 at Rs 389) led the rally and moved up over 3 per cent each in intra-day trade. HDFC Bank and Axis Bank from Nifty Bank and Nifty Private Bank indices were up in the range of 1 to 2 per cent on the NSE. In comparison, the benchmark index Nifty 50 was up 1.3 per cent at 03:07 pm.

Analysts at Prabhudas Lilladher say the current valuations are already factoring upgrades in asset quality, credit cost normalisation and recovery from multi-cycle low ROEs especially for private corporate banks. For next compounding cycle and higher normalised ROEs, capex pick up will be essential which will lead to improved pricing, better fees and lower cost/asset ratios, they believe.

“Valuation re-rating in the last best cycles of FY04-07 and post Global Financial Crisis of FY09-11 was led by asset quality improvement, margin recovery and sharp loan book growth led by corporate segments,” the brokerage firm said in banking sector report.